“Virtual separation” of Frontier’s fiber systems could mean actual abandonment of rural Californians

26 August 2020 by Steve Blum
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San benito pole route 13apr2019

The gap between urban fiber haves and rural have nots could grow wider in California as a result of Frontier Communications’ bankruptcy settlement. Its reorganisation plan was filed with the California Public Utilities Commission yesterday, after receiving approval from the federal judge in New York overseeing the bankruptcy proceeding.

The plan turns ownership over to banks and financiers who hold billions of dollars of Frontier’s now worthless debt. A cryptic paragraph buried deep in the plan calls for Frontier to develop a “detailed” proposal for a “virtual separation” of “select state operations” where the new owners “will conduct fiber deployments” from other operations in those states which will be blessed with vague “broadband upgrades and operational improvements”.

Translation: if there’s a fast track to profits, we’ll install fiber, otherwise we’ll let the copper rot.

Verizon hung onto most of its long haul fiber when it sold its Californian telephone business to Frontier in 2016. Frontier got Verizon’s fiber-to-the-premise “FiOS” systems in southern California, mostly in relatively affluent communities. Since then, Frontier has applied for California Advanced Services Fund grants to deploy fiber in a handful of communities, while doing limited DSL upgrades in others.

This “virtual separation” of fiber worthy communities from those less fortunate was floated earlier in Frontier’s bankruptcy proceeding, provoking a sharp response from the union representing its employees in California and elsewhere and a Californian advocacy organisation. The Communications Workers of American and TURN asked the Federal Communications Commission to take a hard look at the deal…

The virtual separation appears to set up a structure through which Frontier could seek to capture the revenues from fiber deployments for investors, potentially depriving retail operations of necessary cash flows, personnel, and other resources…

The [FCC] must ensure that an entire class of customers does not remain on the wrong side of the digital divide based on Frontier’s strategic decision to limit its investment in certain communities where it remains as the only source of broadband Internet access.

As the plan approved by the federal judge reaffirms, Frontier and its creditors need CPUC permission to close the deal. That review is underway and remains on track to conclude early next year.